There’s no doubt the war between the generations is hotting up as cash-strapped governments decide what services to cut and who to tax.

I used to get funny looks when I blamed baby boomer landlords for the high price of starter homes. Now that opinion is mainstream.

One MP has even written a book about it. The Pinch, by Tory minister David Willetts, is all about how the older generation have seized a disproportionate amount of wealth from their children.

And I’m inclined to agree. From job opportunities to peace to pensions to property, the post-War generation seems to have had it all.

Some argue though that the boomers didn’t get an easy ride. They tend to be boomers, funnily enough!

That said, I recently enjoyed a debate where a 30-something man took the opposite view, saying he pitied those in their 60s, and 70s. Our world was amazing, and getting more amazing by the day, he argued. Pining for the old days was pure nostalgia – the only people he felt envious of were his children.

So who is right, from a financial perspective as well as general quality of life?

I don’t have a definitive answer, but I do think there’s a couple of aspects to the debate that people are missing.

But let’s first recap the benefits enjoyed by the boomer generation, and also those of their offspring now in their 20s and 30s.

The boomers had it best…

Nobody is seriously arguing that the baby boomers born just after the war weren’t far luckier than their parents.

They didn’t suffer two World Wars. In Europe especially but also in the US, they also benefited from an expanded social safety net, more money in education, and infinitely superior and accessible health care.

But how do the boomers rank against their own offspring?

Pros of being a boomer:

• Stable work environment (at least until the ’80s)
• Affordable housing
• Final salary pension schemes
• Social mobility improved
• Grammar schools for the bright
• Relentlessly increasing standard of living
• Emptier roads, beaches, and beauty spots
• Lived through rock-and-roll and the 1960s

Boomer downsides:

• Rigid careers
• Hard to get loans or mortgages
• No shops open on a Sunday
• Sex not invented until 1963
• Lived in the shadow of the atom bomb
• Products (but not services) were worse and more expensive
• Restaurants in the UK were awful
• No computer games, plasma screens, mobiles or the Internet

Perhaps it was better to be born in the 1970s?

We all know that young people are automatically rich. But the boomers were young once, too, so their kids aren’t any luckier in that respect.

Here are some better points of comparison:

Benefits of being 20 to 30-something today

• Everyone but total numpties can go to university
• Foreign travel cheap and easy
• Flexible ‘portfolio’ careers
• Opportunity to work anywhere via the Internet
• Far better if you’re black, gay, and possibly female, too
• Boomer riches should trickle down eventually
• More accessible investing: ETFs, trackers, Monevator
• Endless cheap goods from China
• Internet, computer games, 3D cinema, and Lady Gaga
• Pornography on demand – how exciting!

Downsides for Generation X, Y, Z

• Little opportunity to drift, try out different jobs
• Graduate debts of £25,000 or more
• Premium for being a graduate eroding
• No job security
• Housing 5-10x average starting salary
• Endless competition from China
• Must fund own retirement from income
• Must also fund boomer retirement, national debt etc
• Pornography on demand – how boring!

Isn’t it all about expectations?

As my lists of benefits and downsides shows, it’s no easy thing to compare the generations. And what makes it even thornier is the issue of expectations.

If you were a clever working class boy who passed his 11+ exams and got into grammar school in the 1950s – and from there a good university – the chances are high you’d enjoy a far better standard of living than your parents could have imagined.

Whether an engineer, doctor, architect or journalist, you’d join the educational and professional elite. You could easily own a big home by the time you were 35, plus golf club membership, a pony for the kids, and a wider family grudgingly admitting for the rest of your life that you’d done well.

Compare that to a graduate today. Raised on the expectations of her parents and the 24-hour have-it-all culture, she thinks that her degree in medieval poetry should afford her the lifestyle that her father enjoyed.

But she forgets that:

• Fully half her peers also go to university now
• She’s not in that top 5% like her dad – she’s just another A-student
• Housing has been bid up by boomers and dual-income families
• Life on the average wage isn’t like Friends or Sex in the City

To make things worse, she may also expect a career AND kids. Whatever floats your boat, but she can’t compare her life to her stay-at-home mum’s who was happy with baked beans and granny’s cast-offs through the ’60s.

It’s all down to expectations.

If you travel to rural Africa or India, you’ll find people likely happier than you living in shacks. It’s not patronizing to say it’s because they don’t expect much, so the arrival of the Internet or a new health service brings them joy.

They didn’t expect it, and it does.

What about the time value of life experience?

Expectations are about our hopes for the future. But what about the experiences we’ve banked?

The 30-something child of a boomer who says he feels better-off than his parents because life is improving every year is assuming progress is going to continue.

Remember the time value of money? This states, effectively, that a bird in the hand is worth two in the bush – that £1 today is worth much more than £1 in ten year’s time.

What is the time value of a year of our life? What if the future is much darker than the recent past?

We haven’t abolished war or disease, last time I looked. Then there’s global warming, extra competition from overseas, the end of oil, and goodness knows what else to worry about.

I’m pretty optimistic about the future, but I don’t deny those are all real threats.

In contrast, boomers have the advantage of knowing they’ve lived through most of their lives in relative peace and prosperity, and with their life expectancy increasing year-on-year.

I’m sure most boomers would swallow a pill to be 25 again and to take their chances, but that’s not an option for any of us. The comfort for a boomer is that while their children strive to be hopeful about the future, the boomers can look back fondly on a pleasant life lived.

My verdict: It depends who you are

I don’t think it’s possible to make a clear cut decision as to whether it was better to be born in the 1950s or the 1980s, even from a financial perspective.

Mix sex, drugs, and daytime TV into the equation and you’ve got a novel, not a blog article.

However I do have some hunches:

• Generally, if you like stuff you’d rather be young now. If you prefer experiences I’d say the boomers had the better bargain.

• If you were a bright lower middle-class or working class boy, you’d have done best to be born a boomer. With hard work, the grammar schools would have pulled you up in life, and society became more meritocratic with you. A great house, a stable family, and a secure pension was yours for the taking.

• If you were born to rich parents, it probably doesn’t matter, but I think you’d have enjoyed the 1960s more. Chelsea, Greenwich Village, and Marrakesh was your oyster.

• If you’re very clever and driven by money, the world is your oyster today. You can easily be on six-figures in The City before you’re 30. That would have taken decades a few generations ago.

• If you’re a bright teenager from a less well-off background, I think you’ve still got opportunities today but you’ll have to strive more than the equivalent boomer. You’ll have to take on debt to get your degree, you’ll be competing with trust fund kids for unpaid internships, and if you want a creative career you may never own a house.

• If you’re willfully ignorant, lazy, pregnant at 16, and/or irresponsible, thank your lucky stars if you’re under 40. Rather than judge you or ask you to improve yourself, our benefit system will shower you with riches – at the expense of those temporarily down on their luck or seriously disadvantaged (the job seekers, disabled, old, and so on).

Harsh but true.

Disagree? Let us know your own verdict in the comments below.

Musings and links to articles about money and investing across the web.

A chap I used to enjoying reading on the boards has opened a new blog, so I’m making two of his first posts my posts of the week.

Roy Dinsdale takes the side of Lynne Rosenthal, a New York professor allegedly thrown out of Starbucks for refusing to use the chain’s Orwellian doublespeak:

She told the New York Post newspaper: “I refused to say ‘without butter or cheese.’ When you go to Burger King, you don’t have to list the six things you don’t want.

“Linguistically, it’s stupid, and I’m a stickler for correct English.”

Prof Rosenthal added: “The barista said, ‘You’re not going to get anything unless you say butter or cheese!'”

Roy adds some sage observations on what Starbucks represents to consumers:

To recap then – a faux environment that is meant to say “neighbourhood coffee house”, a rigidity of product and language that could easily be regarded as “take it or leave it” – but which we are not meant to see because the kid behind the counter calls us “guys” and a plethora of  marketing tricks that insult our collective intelligences. […]

Starbucks is not going to rot the fabric of civilised society, but enough companies or individuals behaving the same way will.

He’s also been expressing his vigorous views on investing in the style that I remember so fondly:

A final word for the Gold Bugs. Actually I would prefer the final word to be just “goodbye” – but fat chance unfortunately.

Gold as an investment yields nothing and is great if we implode into savagery and revert to a Mad Max scenario – but only if you have it secreted about your person.

Ignoring the more extreme survivalist ravings (if they are true, forget gold and buy bottled water, shotgun cartridges and tinned beans – all to be kept in your bunker in the Highlands) it is a “reverse bubble” built on the same psychology as the “system” it purports to eschew.

If the ordure ever did hit the air conditioning that badly, what good would a few bits of paper saying you own gold be worth?

A very promising start, Roy! But please learn to start embedding links into the stories you discuss.

[continue reading…]

I wrote recently about Germany’s super GDP growth. Germany’s exporters are making hay this summer, which may mean it’s a good time to invest in German companies.

By rights, this shouldn’t be happening.

If the Euro didn’t exist and German companies were trading under the Deutschmark, that German currency would be most beautiful in the Western world and rated sky high against the basket cases elsewhere. German companies would be laying of workers to try to retain their competitiveness – like US ones did – or simply losing sales like the Japanese.

So three hearty Germanic cheers for Greek fecklessness, Irish over-optimism, and the Spanish property implosion!

The sovereign debt crisis that caused currency traders to dump the Euro has helped the Germans, whose exporters now enjoy a very useful currency advantage. Weakness in the south of Europe means the ECB’s single interest rate is lower for the north than it should be, too.

No wonder unemployment is already falling in Germany and GDP growth came in at 2.2% in the second quarter.

How to invest in German companies

If you think this splendid combination of a weak currency, low interest rates, and a strongly recovering domestic economy will continue for Germany, then you may want to invest in German companies.

There are a few ways that UK investors can do this:

German index tracking ETFs

With their low costs, ease-of-trading, and diversified holdings, index tracking funds should be the first thing to consider. Sadly though, I’m not aware of any London-listed ETFs that track the DAX, the main index of Germany’s biggest 30 companies.

That said, your stockbroker should let you buy and hold Deutsche Bank’s German-listed DAX ETF (dig past the T&Cs on the DB site for details), which costs just 0.15% a year to run, can be held in an ISA, and has UK distributor status for tax purposes. Alternatively, if you like buying US shares look for the US-listed iShares MSCI Germany Index Fund. The annual cost is a steeper 0.55%.

Buy an iShares ETF with exposure to Germany

If you want a UK-listed ETF, iShares does offer some tangential options. I’d consider the iShares Euro Stoxx Total Market Growth Large ETF (Ticker: IDJG). It’s a mouthful, but it’s a mouthful with decent exposure to big German exporters like Siemens, Daimler and Bayer, as well as similar companies from France, Italy and elsewhere that should also benefit from Euro weakness.

Have a hunt around the iShares site for other European options, with a value or smallcap tilt.

Buy an investment trust

Again, I’m not aware of a German-only investment trust (ambivalent about the Germans? Us?) so you’d have to consider your general European investment trust options via Trustnet or similar.

Alas, the investment trusts I looked at only have 10-20% of their chips on the German table. Also beware of very German sounding investment trusts – they are virtually all property companies, which is a different proposition to investing in German exporters.

(Note: there may be German unit trusts available, but I almost never invest via those and don’t know of any off-hand. Tell us below if you do!)

Buy shares in German companies

If you’re a stock picker, then you could invest in German companies directly. By buying shares in Siemens, BMW, and so on, you’d get a fair proxy for the German export sector. I’d be very unlikely to buy German stocks, though, since as well as all the other hurdles of stock-picking I can’t read the language!

Don’t forget currency risk

Exchange rate fluctuations between the pound and the Euro will partly determine your returns if you decide to invest in Germany.

Remember though that currency risk also acts to diversify your portfolio, so it’s swings and roundabouts.

As you’d expect from the most liquid asset, currency moves are inherently unpredictable. Yet it’s hard not to look at the following graph and see a pound that’s likely to get stronger in time:

A stronger pound versus the Euro would reduce your returns if you invest now in German companies, since your Euro-denominated investment would be worth fewer pounds when you bring your money home in the future.

But as I say, nobody knows for sure when or if that could happen.

What about valuation? Going on the latest data from the FT, the German market doesn’t seem particularly expensive from a P/E perspective:

• Germany P/E 14.5
• UK P/E 13.9
• US P/E 15.6
• France P/E 14.7

Remember that each of those indexes boasts very different kinds of constituents – and the P/E takes no account of domestic tendencies towards debt or cash, say, which limits the usefulness of a comparison.

For my part, I’ve decided not to invest in Germany specifically for now (I permanently hold a range of overseas trackers, including a European one). I think the UK market looks just as affordable and geared to global growth, and I fear a £/€ currency shift would be more likely to hurt my returns if I invested in Germany now, rather than ‘surprise to the upside’, as the Cityboys say.

On the other hand, if the Euro weakened against other currencies as well as the pound, that would help German companies to compete even harder. So there’s a bit of an in-built hedge at play.

As ever, a long-term portfolio-based approach is best for most people, as opposed to speculating on the economic roundabouts of international trade.

But if you want to invest in German companies for the long-term, then the weaker Euro certainly provides a good justification to take the plunge.